APAC Market Digest: Best US & ASX performers over the last 7 days of Russian conflict

Co-written by Market Strategists Jessica Amir in Australia and Redmond Wong in Hong Kong. 

What’s happening in equites market

• In the US overnight the Nasdaq 100 (USNAS100.I) and the S&P 500 (US500.I) charged 1.6% and 1.8% with believe it or not, with stocks like Paramount Global (PARA) rising the most (up 9%), while Las Vegas Sands (LVS) rose 10% due to the economic reopening. However most of the other strong performers were beneficiaries of the crisis in Ukraine with Steel giant Nucor (NUE) rising 5% and oil company Baker Hughes (BKR) shares rising 7%.

• In Australia the commodity rich ASX200 (ASXSP200.I) rose for the 5^th day, up 0.8% before 1pm Sydney time with oil and mining stocks surging. For the ASX200 from a technical perspective, it looks like the moving averages the MACD and RSI are pointing to a rally, suggesting a bullish trend could kick off. Today, Australia’s largest coal company Whitehaven Coal (WHC) rose 6%, followed by oil company Santos (STO), and coal heavy business Washington H Soul Pattinson (SOL). Elsewhere, investors seem to be taking a view that lithium will do well given the surging prices of oil. Lithium company Liontown (LTR) who has a non-binding offtake/sales agreement with Telsa, rose 5%. While most of the other strong performers were beneficiaries of the supply crunch in commodities caused by Russia and Ukraine supply being cut off. Nickel Mines (NIC) shares surged 5%, Oz Minerals (OZL) and IGO (IGO) followed.

• In Asia, Hong Kong’s Hang Seng (HSI.I) opened higher by 0.7% and China’s CSI300 (000300.I) was up 0.4%. Hang Seng’s gain mostly attributed to HSBC (00005) which rallied 2% and Techtronic Industries (00669) which surged 8% following the release of strong earnings.  Shenzhou (02313) fell 15% after issuing profit warning.  In A shares, coal mining stocks surged. February Caixin China PMI Services came at 50.2 (vs consensus 50.7, Jan 51.4).  In Singapore, the Straits Times Index (STI) opened 0.8% higher.  February Market Singapore PMI came lower at 52.5 (vs 54.4 in January). Written by Redmond Wong.

What to consider

• In Equites, be mindful further volatility is ahead as funds, ETF providers etc. exclude Russia. The index creator MSCI has removed Russia from emerging market status. This means Russia will be removed from Emerging Market ETFs, which will likely cause volatility in equites, as ETF providers will rebalance their portfolios.

• Amid these uncertainty times, we believe diversification is important. We think investors should be overweight in the commodity sector, cyber security, defence, mega caps and logistics: click here for more, or here for 6 ways to react to the current situation.

• In equities, some large ASX and US energy and coal stocks are up by 50% in 7 days. These are some of the biggest gains seen in 50 years. And there is likely more to come if the situation gets longer in the tooth. We’re increasing seeing 'smart' money favour commodities due to tightening supply. And since Russia invaded Ukraine 7 days ago, on Feb 24, energy and coal stocks have seen a lot of buying as Russian supply was cut off from the rest of the world and Russia has been the 3^rd largest energy supplier in oil, gas and coal. This additional lack of supply is a real worry for consumers as it pushed up the price of oil to $111, its highest level since 2011.  Saxo’s head of Commodity Strategy thinks oil could hit $130 if the Russian situation gets worse. Bank of America says worse case is $200. See Saxo’s technical analysis on the levels to watch in oil. Meanwhile, overnight the coal price surged to a brand new record all time high, after rising 100% this year.

• So where is money flowing in the ASX and in the US this year? Well Energy stocks have been most bought stocks over the last 7 days, since this crisis unfolded. On the ASX Woodside (WPL), Beach Energy (BPL) and Santos (STO) which have been bought the most, and their stocks are trading up between 50-30% in 7 days. In the US; the most bought energy stocks are Occidental (OXY), APA (APA), Marathon Oil (MRO) and Haliburton (HAL), which are trading higher by between 40-60%  in 7 days. Click here for more on coal. 

• Wheat prices are soaring amid the crisis and are now back at 2008 highs - don’t forget much of the world’s breadbasket comes from Russia, which is the largest exporter of Wheat and Ukraine is a top 4 exporter. And Ukraine’s export terminal is closed. So we are seeing a lot of clients buy wheat contracts through Saxo. And separately as for stand out grain stocks, the most bought grain stock on the ASX is GrainCorp (GNC) up 12% in 7 days.

• In Hong Kong & the China A share markets:  China’s National People’s Congress (NPC) is scheduled to convene on Mar 5.  The NPC will discuss the country’s economy, growth target for 2022, budgets and government finance.  Economists are expecting this year’s GDP growth target at around 5% to 5.5%.  Written by Redmond Wong.

Trading ideas

• Aside from the above considerations, consider that carbon capture storage (CCS) technology is rapidly advancing and being looked at, and could be used together with coal, given Russian natural gas and oil has been limited. Saxo’s Head of Equity Strategy Peter Garnry takes a look at the technological advances in carbon capture, and companies with exposure to carbon capture, coal mining and coal mining related services.

Upcoming earnings season calendar

• In Hong Kong & China A Shares: Mar 3: Bilibili (09626), Weibo (09898), Trip.com (09961), Wharf Real Estate Investment (01997). In Singapore: Mar 3: Jardine Matheson (J36), Hongkongland (H78), Yangzijiang Shipbuilding (BS6)

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For prior Australian market and APAC updates - click here.